Phil Grossfield's Blog


Monthly Archives: September 2013

Proud To Be An American – WARNING! Sarcasm Detected….



American Psyche.  Sure, let’s shut the government down…what difference does it make? Estimates appear to be in the $1.5 billion range but that’s no big deal, right? And what about the Republican party?  They can take the hit even if most American’s feel they are acting like cry babies willing to hurt our entire economy to ensure our President doesn’t get his way. But no matter…the Republican Party is strong, right?  It can take it!

It’s not like the Republican party has been reeling the last two elections. Sure, Mitt Romney was unable to connect with middle-minded Americans and these citizens sided with the Democratic Party as a result. But it’s not like the Republican party has lost that many numbers, right? It’s not like the Republican party needs to find its way back to the majority. The Republican party can withstand yet another hit to its public confidence. I’m sure the middle-minded American people will flock to support the Republicans after they are blamed for the government shutting down. Eh, who cares anyway…we’ll just have Democrats on Capital Hill indefinitely…no big deal, right?

robotsOh, and our economy can take it, can I get an “Amen!” Sure sure, we’ve got nothing to worry about…the economy is improving, right? Oh, wait a minute, the Fed decided not to taper QE because it said the economy was still too fragile. Oh well, I’m sure shutting the government down won’t impact things. I’m sure our elected officials have our best interests at heart.

We’re the world’s super power…nothing can stop us. Even an internal meltdown and constant bickering instead of working together won’t weaken the great United States of America!  Our elected officials can play rock ’em sock ’em robots all day long and we’ll still be the best! In fact, I’m sure our most successful American businesses are taking notes on how to be more successful next year. America is teaching its businesses and future leaders that an approved budget just isn’t necessary…we don’t need it!  I’m so proud!

My Market Watch:  Bonds Flat – Government Shutdown Looms – Arm & Fixed Pricing Unaffected Thus Far.  The  30-year Fannie Mae bond is trading flat. At one point I was concerned bonds would be sold off and Capital Markets would reprice for protection, but that threat appears to have dissipated.

Government Shutdown. The government is preparing to shut down tonight unless a last-minute resolution is reached. Again, I just can’t believe I typed that. And quite frankly I have no idea how the markets are going to react to either a shutdown or a last minutes resolution. I guess it could go either way. Since traders are not doing anything, I don’t think they really know what to do either.


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

It’s Not The Miles; LOCK ‘Em Up! Government Shutdown?

oldmanIt’s not the miles, it’s how you live them…  Life is not a journey to the grave with the intention of arriving safely in a pretty and well-preserved body. But rather, to skid in broadside, thoroughly used up,totally worn out, and loudly proclaiming …. WOW what a ride! ~Mark Frost

It’s not the miles, it’s how you live them…

My Market Watch:  Bonds Up Again – Arm & Fixed Pricing Improved…Again!  The  30-year Fannie Mae bond is trading up again about +30bps.

govtshutdownGovernment Shutdown. What?!  The government is preparing to shut down next week. I can’t believe I just typed that. I don’t even know where to begin on this topic. Is Obama right? Should he continue to stand his ground? Are the Republicans being unreasonable? At what cost? I’m absolutely categorically disappointed in our government, Democrats and Republicans alike. That’s all I have to say about that, at least for now….

I strongly encourage you to lock as many loans as you can…preferably now. I know pricing has improved steadily, but rates are great…get commitments from your borrowers!   Take advantage of this time. I don’t want to be a buzz-kill, but it’s not going to last. moneylockIf we’re lucky, we can squeeze a couple of more months out of the current low trend. But eventually QE Tapering will make its way back to the forefront, and when that happens, well, you know….  So, use this as a motivation to get as much business as you can, and acquire as many referral sources as you can. When rates increase, you will need those referral sources greatly.


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

Lenny Is Cool; All Pricing Improves Again

lennykravitz2Lenny Kravitz Is Cool  I’m a fan…love his music. And if you look Lenny Kravitz up in the dictionary it simply says, “cool.”  I even follow him on Facebook and I don’t follow any other celebrities…not really my style. So let me make a case for this odd and somewhat embarrassing behavior.

lisabonetFirst, he married Lisa Bonet who I was absolutely in love with when I was in high school…she’s my age you know. Ugh. Second, even though he is divorced from Lisa, they have a kid together and remain close friends. They even hang out with each other and with their new spouses. I don’t think I could do that but I admire it…very mature. Third, Lenny is very laid back and seems to me to be very down to earth, unlike most Hollywood types. I love this post he put on Facebook…he was having a drink in New Orleans and heard a band playing his song “Fly Away” in the distance. So, he went to investigate…see what happens….  I don’t even think most of the kids realized who he was…you got to check this out. 

My Market Watch:  Bonds Up – ARM & Fixed Pricing Improved.  The 30-year Fannie Mae bond is trading positively this morning and is up +13bps on the day. As a result, fixed pricing is improved from Friday.

This week has a lot of housing reports. Hopefully with QE Tapering off the table for a month we might see some stable responses from Capital Markets when the reports starting coming in tomorrow. I think this is a good time to lock although I wouldn’t be surprised to see many float in hopes of better pricing throughout the week. For my money, I think we’re at the top of the roller coaster.

I could write something about Durable Goods or other housing data, but suffice it to say the reports have been uneventful this week so far and bonds remain sticky at their current levels. This is a welcome sight since volatility seems to work against bonds most of the time, at least for the last 4 months. The other encouraging news is the data on the purchase market which seems to be strong. This is a bit concerning to me since the brokers I speak to indicate that purchases have been harder to find. Hopefully the uptick in MBS buying will help.


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

Pink Party!

Pink Party!   My wife turned 40 yesterday (shhhh, don’t tell her I told you) and she wanted a pink birthday party…so that’s what she got. We had pink food, pink drinks, pink flowers, pink cake, pink decor, and guests came dressed in pink. It was pinkalicious! The best part of the party was having Colleen’s sister fly in from Minnesota for the pink festivities.  What a weekend!


Strong Nerves

dentistStrong Nerves.  I don’t want to get kicked out of the man club so I’ll tread lightly here, but I have sensitive nerves. I went to the dentist to get a filling replaced. They hit me with the novacaine. Then I told the hygienist I wanted more…I explained I’ve had issues in dental chairs before. So, she hit me with another dosage of pain killer.

spidermanYou’d think I’d be good at this point, yes? No. The dentist hit something and my reaction must have scared the living crap out of him. If I were Spiderman I would have sprung out of the chair and found myself clinging to the ceiling. So, they hit me with the third dosage. At this point I couldn’t feel half my head which was fine by me. However, trying to drink some coffee and eat some eggs that morning became quite challenging.


Fed Declares Happy Hour Mandatory! Hallelujah!

Ben3Fed Tapers Tapering!  I said the likelihood the Fed would back off QE tapering was as likely as:

1. The Minnesota Vikings Winning the Superbowl;
2. Me winning the Powerball Lottery; and
3. The Fed declaring daily Happy Hour mandatory for the entire mortgage industry.

DREAMS DO COME TRUE! The Fed said it would continue to buy bonds at the same clip previously, nearly $85/month because of a soft economy. I am ecstatic! Price improvements are coming already…buckle up! The Fannie 30-year bond is up over +115bps so far and rising! Interbank already repriced twice and the bond continues to soar. I recommend you wait to lock and see where things settle for now.





Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines


Is Santa Real? Tomorrow is Fed Day

santaIs Santa Real?  The 3rd-grade girl asked. My wife responded, “what do you want to believe?” My daughter responded using Jack Nicholson’s voice, “I want the truth.” So, my wife told her. Damn! Of course, my wife regrets telling her now, but not because the 8-year old knows the truth…that was coming eventually anyway. But the real damage was done to her little brother, the 5-year old.

Despite my wife adamantly instructing the girl not to say anything to her brother, guess what happened. Yep, she told him, in confidence of course. So when the boy started asking questions we knew immediately the source. Being a nice Jewish boy from Minneapolis, I am confused with this scenario. We did some damage control, but I fear the innocent belief my son had, which I fondly adored, might be lost. Hell, even I want to believe in Santa.

My Market Watch:  Bonds Flat – All Eyes on the Fed Meeting Tomorrow.  The 30-year Fannie Mae bond was up this morning but not by much after yesterday’s fall. Interbank’s overreaction of 4 reprices for the worse was fixed in this morning’s rate sheet. Trading will likely be light today as everyone awaits the Fed’s statement tomorrow regarding QE Tapering.

If you want my explanation of Quantitative Easing and Tapering, then read this: My QE and Tapering Explanation and Analysis. If you want my explanation of yesterday’s reprice craziness, then read this: My Update – Bonds Tank After Early Gains.

What’s going to happen tomorrow? One of 3 things:celebrate

  1. The Fed completely backs off of QE Tapering. If this happens, traders would buy bonds in droves and the price of bonds would rocket. As a result, lender rates/prices would improve dramatically. Oh, in addition, the Fed also declares that everyone in the mortgage industry must take mandatory Happy Hour each day.
  2. The Fed affirms QE Tapering but has limitations, both in scope and timing. Their policy is to taper but ever-so cautiously and slowly…stretched out over a long period of time to ensure the fragile economy can withstand the decrease in Fed purchases of MBS. The language used by the Fed is carefully constructed to ensure a clear message that QE is here to stay for the foreseeable future. If this happens, I suspect a minor sell off in bonds by traders. As a result, lender rates/pricing would worsen, but not too bad, and the market would stabilize in a short time frame.
  3. volcanoThe Fed affirms QE Tapering in full force. They announce their intentions to significantly taper QE. Moreover, they issue a tentative aggressive schedule of tapering beginning immediately. Upon hearing the news traders sell off bonds and the price drops intensely. As a result, lenders issue several reprices for the worse and rates increase significantly. Everyone holds their breath until the market settles down.

prayI’m putting my money on #2. Why? Well, #1 is as likely as the Minnesota Vikings winning the Superbowl this year, and if you’re not a football fan, you should know the Vikings are not looking good. Although nobody I know believes #1 will happen, there are many who believe #3 will happen. But I’m going with #2 if for no other reason than I need to think positively. For some reason I think the Fed will soften their language, and I’m hoping this will be enough to stop the volcano from exploding. Let me know your thoughts….

My Disclaimer

My Schedule:  Available before 3p, then unavailable….


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

QE Tapering Explained – For my explanation QE and tapering, read my QE analysis from an earlier post.  

LO Comp, Ability To Repay Qualified Mortgages. Here is Fannie’s announcement about ATR – Ability To Repay, QM – Qualified Mortgages, and the new compensation rules:  Fannie Guide Announcement.  And here is a video by the Consumer Financial Protection Bureau – CFPB explaining Qualified Mortgages and Ability To Repay guidelines :

My Update – Bonds Tank After Early Gains

Bonds Tank After Early Gains. The 30-year Fannie Mae bond was up +70bps this morning and then sold off and has dropped down almost to the opening point. We lost -50bps since rates were published. Moreover, Interbank issued 4 reprices for the worse…it’s rare to see 4 in a row…I think I know why.

Please note, before I begin, I will not be including the Washington D.C. shootings in my analysis…I’m still trying to get a handle on that news, and how it might affect the market.

fedreserveFirst, the air is thick, like butter thick, with the pending Fed monetary policy decision coming on Wednesday. Pretty much everyone expects the Fed to announce QE Tapering which will decrease the amount of bonds the Fed buys. In my opinion, even though everyone knows the Fed is going to announce tapering, traders are still ready to sell off bonds on the news. I am hoping, praying, that the Fed announces a mild and tempered policy of tapering. My hope is that traders will not sell off bonds in force on the news. Remember, when traders sell off bonds, the price drops and our rates worsen.

Second, traders aggressively bought bonds this morning presumably on the news that Larry Summers pulled himself from consideration to replace Bernanke as the Fed chair. However, I believe the amount of trading this morning was more than would have been expected. buylowsellhighSo, the higher trading resulted in a very high bond price, higher than normal if you will. And since traders like to buy low and sell high, and since they know the price will likely fall soon with the Fed announcing monetary policy, they sold off to take the gains. Put another way, having such a high bond price this morning was like putting a juicy steak in front of my friend Barry…he would stare intensely, growl and pounce.assad

Third, the military response to Syria is essentially on hold. Since the threat of military action isn’t imminent, traders are not deterred from investing in stocks…and bonds indirectly would suffer as a result.

c30Fourth, I think the technical signals for bond trading were getting a little scary for a Capital Markets department. As you can see from the graph, the bond went up +70bps early this morning as it neared Ceiling 3, and then it dropped all day and eventually fell through Floor 2. The next floor down is the Lobby and Capital Markets did not want to take a chance on the bond falling so low. So, I think they repriced 4 times for the worse simply to protect themselves…a damage control strategy.

In my opinion, the only hope for a stabilized bond price, and therefore subsequent stabilized lender rates, is to hear a mild statement on Wednesday from the Fed regarding QE tapering. Ideally the Fed would back away from QE tapering altogether which would result with a huge bond rally…rates would improve dramatically. I’d say the chances of that happening are at least as good as me winning the CA State powerballLottery on Wednesday and becoming a millionaire with a private jet…IT COULD HAPPEN, but I need to go buy a lottery ticket first. Even more likely is the hope for a mild statement on QE tapering that gives traders the impression that QE is here to stay in good force for many months to come. This would give traders a good reason to buy bonds which would help rates tremendously. But what we do not want to hear is a statement from the Fed that they have decided to significantly taper QE starting immediately. This would be devastating for bonds and our rates, and many think this is exactly what is going to happen. I choose to think positive…I’m going to go buy a lottery ticket.

For tomorrow, I wouldn’t be surprised to see a minor improvement early in the morning and then a similar sell off as the day goes on. I’D LOVE SOME FEEDBACK…please let me know your thoughts…..

My Disclaimer

My Schedule: Available all day….


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

QE Tapering Explained – For my explanation QE and tapering, read my QE analysis from an earlier post.

LO Comp, Ability To Repay Qualified Mortgages. Here is Fannie’s announcement about ATR – Ability To Repay, QM – Qualified Mortgages, and the new compensation rules: Fannie Guide Announcement. And here is a video by the Consumer Financial Protection Bureau – CFPB explaining Qualified Mortgages and Ability To Repay guidelines :

Comp Plan Changes 4th Q; Fed Chair and Meeting

commissionpercentageLower Your Comp For Higher Volume?  The window to change Lender-Paid Comp Plan for Brokers begins today and ends on Monday 9/30.  This is a relevant discussion for correspondent bankers too…it’s the same analysis on whether a new commission strategy should be implemented. The questions are:

  1. Should you reduce your commission as a strategy to increase volume?  That is, if you reduce your commission, will this make you more competitive and allow you to win against other LOs?
  2. Should you increase your commission as a strategy to increase revenue?  That is, if volume is decreasing because of the market, should you make more on each transaction?

compchartMy opinion depends on your current marketing strategy.  If you rely on consumer marketing then I advise you reduce your commission to strengthen your competitiveness. However, if you rely on solid long-lasting referral sources, then you might want to increase your compensation to account for an expected drop in volume. I am happy to discuss…call or email anytime….

The window for Brokers to change their comp plan is currently open…but it closes on Monday 9/30. If you do nothing your comp plan will stay the same.  If you change your comp plan it will be effective for submission packages uploaded on October 1 and for the remainder of the fourth quarter. Let me know if you require instructions on how to change your plan….

My Market Watch.  Bonds Up Then Lost Half The Gains Fast – Fed Meets This Week On QE Tapering. The 30-year Fannie Mae bond was up ~ +70bps this morning after Larry Summers withdrew his name from the Fed Chair appointment race. Since he bowed out, there is less uncertainty about who is going to get the appointment, traders like it when there is less uncertainty so they started buying big early this morning. But then  bond sold off and half of those gains went away, and rather quickly. My guess is traders saw this as an opportunity to take some quick profits ahead of the Fed Meeting this week…and that’s where all the focus will be the next couple of days. It’s all about QE Tapering.

Without more information, my previous explanation is good…at least I think so…let me know your thoughts…..

My Disclaimer

My Schedule:  Available all day….


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

QE Tapering Explained – For my explanation QE and tapering, read my QE analysis from an earlier post.  

LO Comp, Ability To Repay Qualified Mortgages. Here is Fannie’s announcement about ATR – Ability To Repay, QM – Qualified Mortgages, and the new compensation rules:  Fannie Guide Announcement.  And here is a video by the Consumer Financial Protection Bureau – CFPB explaining Qualified Mortgages and Ability To Repay guidelines :

He Broke My Plate; Fed Meets Next Week – QE Tapering

brokenplateHe Broke My Plate.  He was angry…really really mad…and why shouldn’t he be? After all, my 5-year old son wanted pizza for dinner and I made him a quesadilla. How dare I…what nerve! So, he slid his plate across the table, onto the floor, and it shattered. The first question you might ask is why would I give a 5-year old boy dinner on a real plate?  The second question you might ask is why would I serve him on my good wedding China? Good questions…nicely done! Well, first of all, my son doesn’t usually behave this way and second, our good wedding china is what we use every day. So back off, okay?

The boy is simply uncomfortable because his Mom, the TravelMama, has been gone all week…she is in Hawaii on business…ahhhh the life of a travel writer. My son is a Mama’s boy and despite my effort to shower him with love to fill the void, it just isn’t the same as what his Mommy can give him.


It’s been a tough week for him…I’ve been emailed not once, but twice from his teacher about misbehavior. For my part, I’ve stayed calm and understanding…something I’ve diligently worked on.

After he broke the plate I sent him to his room…this gave me some time to cool down and assess my options. Then I cleaned it up but left the vacuum and garbage out so he could see the aftermath. During this whole time my 8-year old daughter was all over me. “What are you going to do Daddy? Are you going to spank him? Are you going to take something away? Does he still get dessert?” Ugh.

After about 10 minutes I went upstairs, put him on my lap, and calmly discussed the situation. What concerned me was when he described himself as a “bad boy.” I said, “no, you’re not a bad boy, you’re a good boy that sometimes makes bad decisions, but no matter what you do I will always love you.”  That seemed to help. Then he asked if he still got to have dessert. I told him he could have half a dessert if he earned it…and he did…he cleaned up and then produced the product you see in the picture to the right. Who’s your Daddy?!

My Market Watch. Bonds Up – Rates/Pricing Similar to Yesterday Morning. Fed Meets Next Week – QE Tapering. The 30-year Fannie Mae bond is trading higher +19bps on the day.  Trading is otherwise quiet.  I suspect the trading is slow because everyone is gearing up for the big week we have next. Yes, the Fed will meet to discuss monetary policy. And it’s all about QE tapering.

What is QE – Quantitative Easing? Quantitative Easing is a term used to describe the Fed’s intervention strategy into the bond market. In an effort to stabilize the markets, the Fed employed a strategy of buying billions of dollars of mortgage backed securities – MBS – bonds. Put another way, the Fed created an artificial market of low-interest rates during our economic crisis by buying bonds each month. This strategy has kept rates low and stimulated the mortgage business for a long time.

What does Tapering QE mean? A few months ago Ben Bernanke and the Fed announced their strategic decision to begin tapering QE. This means they intend to decrease the amount of bonds the Fed buys. They are doing this because they feel the economy has recovered enough to withstand a more natural lending environment where they don’t have to buy billions of bonds each day. Because the Fed has said it will decrease, or taper its buying of bonds, traders have pulled their investments out of bonds and as a result rates and pricing have worsened dramatically over the last 5 months.

Ben2What is all the buzz about next week’s meeting? Many believe our economy is strong enough to withstand tapering…they want the Fed to significantly decrease the buying of bonds, and right now. Others, like myself, feel the economy is still extremely fragile and want the government to continue buying bonds…or at the very least limit tapering to a minimum and stretch it out over a long period of time. Next week everyone is expecting some insight from the Fed on what they intend to do.

How will next week’s Fed Meeting affect us? If traders interpret the statements as a reaffirmation of QE tapering, and if they feel the Fed intends to accelerate either the amount of tapering or the speed of tapering, then the bond market will drop and rates/pricing will get worse…much worse. On the other hand, if the Fed softens their language, and they give traders the impression that QE will continue in strong force for some time to come, then we could see a significant reversal in bond trading. In this case traders would invest in bonds and when that happens rates/pricing stabilize or improve.

What’s going to happen? I have no blanking idea. As I always say, if I knew such things I’d be a gazillionaire. But I will try. But not today…next week….

My Disclaimer

My Schedule: I have a meeting this morning until 10:30a and then will return all calls and emails. This afternoon I have to take my son to the doctor so I will be unavailable after 2p.


Wholesale: Non-Conforming Matrix & Guidelines
Correspondent: Non-Conforming Matrix & Guidelines

QE Tapering Explained – For my explanation QE and tapering, read my QE analysis from an earlier post.  

LO Comp, Ability To Repay Qualified Mortgages. Here is Fannie’s announcement about ATR – Ability To Repay, QM – Qualified Mortgages, and the new compensation rules:  Fannie Guide Announcement.  And here is a video by the Consumer Financial Protection Bureau – CFPB explaining Qualified Mortgages and Ability To Repay guidelines :

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